Firms’ disclosure compliance with IASB’s Management Commentary framework: an empirical investigation

The aim of this study is to analyze the information conveyed by the MC report for a sample of firms listed on the Italian Stock Exchange at the end of 2010. More specifically, we investigate the determinants affecting the extent of firms disclosure compliance with the IASB’s MC voluntary guidelines, reported in the IFRSps, soon after its implementation. To the best of our knowledge, this is the first empirical study which examines the explanatory factors affecting the extent of voluntary disclosure convergence in relation to IFRSps, with reference to Italy. To analyze the informational content of each MC report, we create an index of disclosure compliance using a self-constructed checklist designed on the IASB’s MC guidelines. To assess the relationship between the index of disclosure compliance and the firm characteristics, we use a regression model. Consistent with previous accounting studies, our results suggest that firm size and ownership diffusion are positively related to the extent of disclosure compliance with IASB’s MC guidelines. On the other hand, the leverage and profitability were found to be unrelated to the index of disclosure compliance. The results also show that the level of disclosure compliance to the IASB’s MC guidance is low, ranging from 10% to 76%, averaging 39%. This means that despite the continued demand for better comparability in financial reporting practices, in Italy a large number of firms do not seem to converge towards a single set of standards for both the narrative and numerical-financial disclosure